Department of Strategy and Donor Coordination

3.3.5 Social insurance
Indicator: Coverage of social assistance scheme: proportion of contributors and beneficiaries
The Albanian pension system is driven by a pay-as-you-go principle, meaning it is financed by the contributions
of employed people to cover the pension costs of the generation of a pensionable age. Both revenues and the
number of contributors to the pension scheme increased in 2008 (Figure 29) as a result of a lowered contribution
rate, the fight against informality in the labour market and an increase made to the retirement age.
Figure 29. Number of contributors 2005–2008
750
718.068
700
650
600
628.637
608.329
653.136
550
500
2005 2006 2007 2008
Source: Social Insurance Institute
Figure 29 shows the number of people insured under the social insurance scheme during the four years from
2005 until 2008. The total number insured in 2008 was 14.2 per cent higher than in 2005, while the number of
contributors employed in the private sector in cities reached 218,000 people, 53.7 per cent more than in 2005.
The scheme dependency rate has improved owing to the growing number of contributors and implementation
of reform to gradually increase the pension age. The ratio of contributors for one person of pension age rose
from 1.23:1 in 2006 to 1.38:1 in 2008. Pension age in 2008 was 62 years old for men and 57 for women. In 2012,
it will be pushed back to 65 years for men and 60 for women.
Income from direct contributions in all social insurance categories grew by around 26 per cent and household
budget transfers increased by almost 36 per cent (16, 233 billion ALL) in 2008 compared with 2005. Reduction
in the social insurance contribution rate, from 38.5 per cent to 24.5 per cent, favoured business development
and encouraged the payment of dues. In these four years, the business contribution rate has been reduced by
almost 50 per cent (in 2005, 29% of salary, while from May 2009 it shall be only 15% of salary).
In the area of social insurance, DCM No. 1477 dated 12.11.2008 introduced mandatory social insurance to be
paid for all employees, including relatives working full time or part time in the business.
State budget expenditure on pension compensation schemes increased by 3.741 billion ALL (90.5%) IN 2008
compared to 2005. The most important achievement in this sector and quite sensitive to beneficiaries was
a progressive rise in pensions of both cities and rural areas. Government commitment to raise minimum
pensions outside of the city to above 50 USD per month and those in the city to more than 100 USD per month
became a reality in 2006.
The minimum city pension in 2009 was increased by 30.9 per cent compared to 2005, while the minimum
rural pension was increased by 85 per cent over this period, i.e. nearly doubling, from 3,430 ALL in 2005 to
6,344 ALL in 2009. Maximum rural pensions were raised by round 81 per cent, while both minimum and
maximum city pensions were raised by 31 per cent. The difference between minimum city and rural pensions
shrank to 38 per cent in 2009 from 56 per cent in 2005, and for maximum pensions to 62 per cent from 73
per cent, respectively. Minimum income in rural areas and cities (including compensation or extra payments)
is 7,234 ALL per month and 12,226 ALL per month, respectively. Maximum income in rural areas and cities
NSDI 2008 Progress Report | 51